Every founder of a startup dreams of their company becoming the next Apple, Amazon, or Alphabet. Every entrepreneur imagines that they have a revolutionary, disruptive business model, and that their company can become a unicorn. Positive thinking is a good thing, but in the Darwinian marketplace of today, there isn’t much room for new market-leading companies. By definition, there is only one leader in each market.
In Blitzscaling, authors Reid Hoffman and Chris Yeh look at “The Lightning-Fast Path to Building Massively Valuable Companies,” as the book’s subtitle states.
This book is for anyone who wants to understand the techniques that allow a business to grow from zero to a multibillion-dollar market leader in a handful of years. These techniques should be of interest to entrepreneurs who want to build massive companies, venture capitalists who want to invest in them, employees who want to work for them, and governments and communities who wish to encourage the growth of these companies in their own regions. And even if you don’t want to build, invest in, or work for any of these companies, you’ll still need to navigate the world that they’re building.
Who is the book Blitzscaling written for?
The biggest problem with Blitzscaling is that its potential audience — the number of people who can effectively carry out the techniques the authors present and achieve that mythical billion-dollar valuation — is very limited. As the authors explain early in the book, they present “a specific set of principles that describes how to grow multibillion-dollar companies in a handful of years.” But not many companies have the potential to grow at that speed, or to that level, and it could actually be risky trying to apply these principles to smaller companies which can only undergo limited growth.
Take one example, that of the power of marketplace businesses. The authors say, “Marketplaces represent one of the most successful business model patterns, with the dot-com era’s Google and eBay and today’s Alibaba and Airbnb standing out as examples of important, valuable companies that follow this pattern.” But do they seriously want to suggest that upstarts should try to compete with these behemoths?
The shifts that led to the power of Google, eBay, Alibaba, and Airbnb are once in a century events. These marketplaces were the most successful at adapting to the new internet era, but they are now so entrenched that it would take seismic shifts to make them vulnerable in the foreseeable future. Plus, their dominance makes it difficult for anyone to compete with them even in niches; and companies that thrive in niche markets, while perhaps profitable, are unlikely to achieve the multi-billion dollar level that the authors tout as possible (nor do they necessarily need to).
The risks of blitzscaling
And the risks are real. The authors suggest acting against your better judgment, and taking high risks; the kind of risks that could tank a company.
When you blitzscale, you deliberately make decisions and commit to them even though your confidence level is substantially lower than 100 percent. You accept the risk of making the wrong decision and willingly pay the cost of significant operating inefficiencies in exchange for the ability to move faster. These risks and costs are acceptable because the risk and cost of being too slow is even greater.
To be fair, amidst all the blitzscaling boosterism, there is a warning:
If your product-market fit isn’t right, or your business model doesn’t work yet, or if the market conditions aren’t right for hypergrowth, then premature blitzscaling can lead oh so painfully (and rapidly!) to “blitzfailing.”
But it’s easy to ignore this cautionary advice and just go full-on with the rest of the book’s ideas.
A lot of this book is made up of commonplaces dressed up with fancy business buzzwords (starting with the title itself). For example, they explain that the three key techniques of blitzscaling are business model innovation, strategy innovation, and management innovation.
There’s nothing original here; these are all the core elements of developing any company. It is not entirely groundbreaking to say, “The real value creation comes when innovative technology enables innovative products and services with innovative business models.” In fact, the authors point out how few people at the beginning of the dotcom era could have predicted which companies would be successful; there’s no reason why the techniques in this book, arguably proven for the most successful companies in the past two decades, will continue to be pertinent as more technological changes arrive.
In many ways, this is just another “greed is good” book, that tries to entice entrepreneurs with pie-in-the-sky ideas that may have worked for a handful of companies, but that aren’t easily applicable to others. The book seems to suggest that by going all in and risking everything, a handful of companies can rise above the rest to dominate the marketplace. But are you willing to take that kind of a risk for your company? Given how few companies can become market leaders, perhaps this book can serve more as a cautionary tale of the type of risk that might not be worth taking.
Why entrepreneurs should read this book
As a case study of how a handful of companies adapted to new market conditions, and notably new technology, Blitzscaling is quite interesting. There’s a lot of retrospective analysis, and it is useful to see how companies took massive risks and became massively successful. But the history of the dotcom era is littered with corpses and dead domain names. It would be good to also look at the companies that took similar risks and failed. There isn’t a lot of room at the top, and, while it’s optimistic that your company can find its place as a market leader, it’s not as simple as this book suggests.